A federal appeals court reinstated a jury’s verdict awarding over $2.4 million in damages to a Texas-based company, I&I Hair Corp., which alleged trademark infringement and unfair competition by Beauty Plus Trading Co. The Fifth Circuit Court of Appeals determined that the district court had erred in overturning the jury’s damages awards, citing Texas law’s allowance for jury determinations based on competent evidence rather than exact figures.
Case Overview
I&I Hair Corp., which markets synthetic braids under the EZBRAID trademark, initiated legal action against Beauty Plus Trading Co. for using a similarly named mark and violating a 2019 settlement agreement. During the trial, a jury allocated approximately $70,000 in damages for trademark infringement, $1.15 million for unfair competition, and $1.3 million for breaching the settlement.
Following the trial, the district court reversed the awards for unfair competition and breach of contract, asserting that I&I had not demonstrated lost profits with precision. I&I contested the decision, leading to the Fifth Circuit’s reversal of the district court’s ruling.
Legal Standards and Evidence
The appellate court clarified that Texas law mandates only “competent evidence” to substantiate damages, not exact numerical calculations. It acknowledged that I&I satisfied this standard by presenting sales data showing a 400% increase in EZBRAID revenue between 2017 and 2018, followed by a 70% rise in 2018 - 2019. Sales growth decelerated to 10% in 2019 - 2020 after Beauty Plus entered the market, with I&I’s revenue declining further as Beauty Plus reported over $5 million in infringing sales from 2019 to 2022.
The court emphasized that I&I’s evidence encompassed financial metrics, profit margins, and testimony regarding brand dilution and supply chain disruptions. It concluded that the jury could reasonably connect these factors to the damages awarded, including I&I’s pre-infringement growth and customer confusion.
Rejection of Key Arguments
The Fifth Circuit dismissed Beauty Plus’ claim that the unfair competition award improperly mirrored its profits. The court underscored that the focus lies on whether the damages fall within the range supported by evidence, not whether they align with I&I’s specific calculations.
The court also rejected Beauty Plus’ challenge to the breach award, noting that Texas law requires certainty about the existence of damages, not their exact amount. Additionally, it found that I&I had adequately preserved its objections to Beauty Plus’ motion for judgment as a matter of law.
Implications for Businesses
The ruling highlights the necessity of trademark monitoring and thorough documentation. Companies must track market changes, customer confusion, and financial impacts of infringing activity to build credible evidence. While precise figures are not mandatory, demonstrating a plausible link between infringement and lost profits remains essential.
Businesses should also ensure competitors adhere to contractual obligations and maintain records to support claims in litigation. For companies seeking a reliable method to protect their trademarks, IP Defender provides a solution that monitors national trademark databases for conflicts and infringements. By tracking 40+ national databases, including the EU, USA, and Australia, IP Defender helps businesses proactively address potential threats.
The case was remanded for further proceedings on attorneys’ fees.